269 entries in the glossary.
Abortion CostsCosts incurred when a transaction does not go through; also called broken-deal expenses.
Accordion Featureoption, which allows the borrower to set the maximum Increase loan amount or incur additional debt under the terms and conditions set forth in the loan agreement.
Acquisition lineCommitted and to be covered by banks’ capital according to CRD IV. underpinning framework loan for acquisitions.
Add-OnsAcquisition of additional companies or assets.
Added ValueValue added by the investor to the investee through existing networks, knowledge and support.
AIFMDAbbreviation for Alternative Investment Fund Manager Directive.
Amend and Extend SolutionModification and extension solution
Anti-dilution regulationIn order to ensure that the venture capital company does not lose its influence, protection against dilution can be agreed in the event of subsequent financing by means of a capital increase. This protection guarantees the fund a proportional increase in relation to the current share.
AppraisalValuation (of company components).
Artificial Intelligence (AI)Also called artificial intelligence (AI), it is a branch of computer science that deals with the automation of intelligent behavior.
Asset DealCompany takeover through acquisition of the individual assets (instead of the company shares). Opposite:“Share Deal”.
Assets under Management (AUM)Refers to a financial ratio that indicates the volume of (customer) funds managed by a company.
B2BAbbr. for business-to-business, expresses the business relationship between companies.
B2CStands for business-to-customer relationships, i.e. between companies and other groups, such as private individuals, consumers.
Back-to-back financingIn back-to-back financing, loans (strings) are granted at comparable conditions over several stages, e.g. by group companies. For example, the parent company issues a loan to its subsidiary (for example, to finance an acquisition) and raises the funds required for this purpose as a loan on similar terms from its shareholders and/or on the capital market.
BaFinFederal Financial Supervisory Authority combines the supervision of banks and financial service providers, insurers and securities trading under one roof.
BasketsBaskets or packages of receivables found in particular in the area of distressed debt investments which, in contrast to portfolios on the one hand and single names/single tickets on the other, do not comprise a coherent portfolio of homogeneous loans, e.g. of a specific business unit, but represent a “partly arbitrary and heterogeneous” compilation of individual receivables.
Bridge FinancingBridge Funding. Financial resources made available to a company to bridge a financial bottleneck in advance of a planned capital increase.
Broken-Deal ExpensesSee Abortion Costs.
Business AngelsWealthy private individuals who finance and in some cases also accompany young companies, research or inventions.
Business planBusiness plan of a company in which the plans, as well as goals and ways to achieve them, are listed and quantified.
Buy & Build (Buy-and-Build)Buy and expand. If an investment company pursues a buy-and-build strategy, it acquires further investments in the same industry on the basis of a company acquired as a platform, which were often in competition with each other, and attempts to combine them into a larger group of companies and exploit synergies.
Buy BackExit variant: Shares are bought back by existing shareholders.
CaducationExpulsion of members of a company in case of delay in payment of their capital share (additional contributions, if any). The defaulting members shall be declared to have lost their share: a) In the case of the limited liability company, after the fruitless expiry of the grace period set by registered letter of min. one month (Section 21 GmbHG), b) in the case of an AG, after three unsuccessful requests; the grace period shall be one month from the last announcement or request (Section 64 AktG).
Call optionCall or subscription option for shares in the company
CapexThis is what the Anglo-Saxon term Capital Expenditure stands for. (capital expenditures). These are the capital expenditures of a company for longer-term fixed assets (such as new machinery, new factory buildings).
Carried Interest (Carry)Profit sharing of the management company and its managers in the success of the managed investor funds.
Carve-OutSpin-offs of parts of companies into independent companies. Either to sell the business unit in question or to float this part of the company independently on the stock market.
Cash Conversion CycleIn business controlling, cash turnover or cash turnover period refers to the length of time for which liquid funds (cash) are tied up in the company’s current assets. It is calculated from the average storage period (stock days) plus the average collection period (duration of debt collection or customer target) minus the average payment target with suppliers (supplier target).
Cash flowA business ratio in which cash inflows and outflows within a certain period are compared (netted), thereby enabling statements to be made on the internal financing or liquidity of a company.
Cash free and debt free agreementIn the context of company acquisitions/sales, a cash free/debt free clause is increasingly being included in the SPA (Sales and Purchase Agreement) in Germany as well. It governs the financial resources with which the company is to be equipped at the agreed purchase price is handed over. A buyer pays a purchase price X with XY cash on hand and XY financial liabilities. The purchase price is thus more precisely defined and variable. If it turns out that the cash position at the reporting date was higher than defined in the SPA, the purchase price is increased by this difference; if it subsequently turns out that the financial liabilities at the reporting date were higher than defined in the SPA, the purchase price is reduced accordingly. Instead of the designation cash free and debt free regulation, also The term “net debt” refers to a “net debt” clause or a “net debt” definition.
Chinese Walls(o. a. “ethical walls”) is the name given to precautions taken by banks to prevent the flow of information between the lender side and trading in exchange-approved securities (within the bank).
ClosingThe completion of a previously signed transaction. Often stands a transaction after signing is still subject to suspensive conditions. Conditions. The execution, e.g. the transfer or issue of the shares, follows only some time later at the “closing”.
Closing accountsIf the parties agree on interim financial statements at closing, these serve in particular to reconcile net financial liabilities and appropriate working capital at the closing date. In some cases, net assets (net equity) are also reviewed. Closing Accounts aim to flexibly adjust the purchase price to the specific financing situation at the time the buyer takes over the company.
Co-venturingParticipation in a company by several VC investors, one of whom acts as the “lead investor”. See also Lead Investor.
COGSEngl. Abbr. for Cost of Goods Sold. This refers to costs that are directly related to the goods or services produced. This is the cost of sales using the cost of sales method.
Commitment FeeCommitment Fee.
Completion Accounts MechanismMechanisms for purchase price adjustments. They protect the buyer against negative developments in the value of the target company prior to closing. On the other hand, they reward the seller for good corporate governance and generated cash flows between the closing date and the closing. In practice, there are a variety of price adjustment mechanisms.
ComplianceAct in accordance with applicable regulations.
Compliance CertificateCertificate (proof) of compliance.
Compliance Management System (CMS)The totality of measures, structures and processes established in an organization (e.g. in a company) to ensure conformity with rules, which can include legally binding and ethical rules. A kind of internal control system. A CMS can take on a variety of legal significance.
Confirmatory Due DiligenceTime-limited exclusivity for any further testing and final contract negotiations granted to a favored bidder by the seller by the seller.
Cornerstone InvestorsInvestors in a company who, in addition to the capital for the investment, contribute other factors that may be significant for the business policy. As a rule, it is mainly well-known individuals, companies or even government agencies that act as cornerstone investors. In addition to capital, they provide factors such as market knowledge, foreign contacts or simply their reputation on the market.
Corporate BondsIn addition to bank loans, companies can also raise funds by issuing corporate bonds. Corporate Bonds, provide debt capital via the capital market. The features such as maturity, coupon and issue volume are explained in the issue prospectus. In this context, industrial companies often issue bonds to ensure or support the liquidity of the company. Particular attention must be paid to the rating of the issuer; the creditworthiness of the individual companies influences the interest rate to be paid for the bond issued. Corporate bonds with a first-class rating have a lower yield than those with a poor rating.
Corporate bondssee corporate bonds.
Corporate FinanceThe term corporate finance refers to a special area of finance that deals with issues relating to the optimal capital structure, the company’s dividend policy and the evaluation of investment decisions and the determination of the company’s value. In German literature, the term corporate finance is used as a synonym. This term, which originates from English-language teaching, encompasses the subjects of investment appraisal, corporate finance, corporate valuation and capital market theory traditionally taught in German-speaking countries.
Corporate Governance(German: Grundsätze der Unternehmensführung) refers to the regulatory framework for the management and supervision of companies. The regulatory framework is largely determined by legislators and owners. In principle, incomplete contracts and different interests offer stakeholders opportunities as well as motives for opportunistic behavior. Corporate governance regulations have the task of limiting the scope and motivation of actors for opportunistic behavior by means of suitable legal and factual arrangements.
Corporate LabStart-ups can be founded via an organization-internal laboratory. and success-relevant business models are brought to fruition via shared services and stage-gate processes.
Covenant BreakA too strong negative deviation from a business plan previously defined together with the banks.
Covenant Light LoansContractual agreement on loans in which the lender waives collateral and rights of recourse to a large extent or, more generally, sanctions for failure to achieve certain business ratios, usually during periods of low interest rates on loans.
Conditions in corporate loan agreements that stipulate ratios to be met by the borrower. A frequently used ratio is, for example, net financial debt divided by EBITDA. If a borrower cannot meet this ratio, it is a ‘covenant breach’ that entitles the lender to demand repayment of the loan.
CPECs (Convertible Preferred Equity Certificates)CPECs are (hybrid) financing instruments, often in cash or company shares at the debtor’s option. are repayable. CPECs can be fixed or floating rate.
CRD IVCRD IV is a European Union legislative package consisting of the Capital Requirements Directive (2013/36/EU) and the Capital Requirements Regulation (575/2013), which sets out rules for banks, building societies and investment firms to hold sufficient financial resources to cover the risks associated with their business and to meet their liabilities as they fall due. CRD IV strengthens the existing framework in response to financial stability concerns that arose during the recent financial crisis.
Cross-default clauseContractual clause commonly used in international loan agreements that gives creditors (usually banks) the option of terminating the loan immediately and without notice if the borrower fails to meet his obligations under other loan agreements on time and in full.
Crypto SecuritiesA special case of electronic security (electronic security pursuant to section 4 (1) of the German Securities Trading Act (eWpG)) and does not constitute a central register security (central register security pursuant to section 4 (2) of the German Securities Trading Act (eWpG)). In contrast to digital assets such as cryptocurrencies and security tokens, the custody of which requires a license for crypto custody business (crypto custody pursuant to Section 1 (1a) sentence 2 no. 6 KWG), the custody of crypto-securities falls under custody business.
DAC 6Effective January 1, 2020, the law introducing an obligation to notify cross-border tax arrangements (DAC 6) entered into force. With this notification requirement, the legislator is pursuing the goal of identifying tax avoidance tactics at an early stage.
DD ProcessDue Diligence Process.
DDQDue Diligence Questionnaire is the name given to the list of questions asked in a transaction.
DealflowTotal of incoming financing requests from companies to a private equity and venture capital company.
Debt buy-backThe shareholder of the borrower acquires credit claims of the lender against the borrower (preferably below par) and subsequently reduces the borrower’s liabilities by contributing the claims to the borrower.
Debt Service Reserve AccountBlocked account into which the borrower must deposit excess cash (’surplus money’) in good times, which then serves as a reserve in the event of a breach of the cash flow cover financial covenant.
Debt-equity swapAcquisition of the loan receivable against a company with subsequent contribution of this receivable to the company as a contribution in kind. Company shares are granted for this purpose. The contribution in kind is regularly preceded by a capital reduction in order to provide the investor with a higher equity share to be granted. The valuation of the receivable to be contributed is regularly problematic in such a transaction, since a contribution can only be made for “if necessary”. greatly diminished” replacement value is possible. This is particularly the case since the nominal value of the shares to be granted must correspond to the replacement value of the receivable.
Debt-to-HoldSuch a purchase of loans usually requires a longer investment period of up to eight years; the investment is held longer. Here, the loans purchased at a discount are sold only after successful operational restructuring.
Debt-to-TradeAn approach within the framework of the non-control strategy, which is focus on the purchase of loans for the purpose of resale to specialized Financial investors focused. This strategy is of particular interest to the trading departments of large Banks typical.
Decentralized Finance (DeFi)Building a decentralized, blockchain-based ecosystem that provides financial services of various types and also has significant interfaces with asset management, which, however, lacks central instances for management and control (so far) — an unprecedented technological structural change in the entire financial sector.
Definitive taxationA tax that must be paid definitively and may not be credited again against any other tax.
Del credere riskAlso called non-payment risk or collection risk. The del credere risk represents the risk that a buyer will not pay the agreed price for a good on time.
DeleveragingCompanies often increase the proportion of debt capital in order to generate stronger growth (leverage). In return, this additional borrowing increases the risk of no longer being able to meet obligations. Deleveraging refers to the substitution of debt capital with equity capital, resulting in a reduction in leverage and thus in the risk assumed.
DelistingDelisting is the name given to a process in the stock market world whereby a listed stock corporation (AG) seeks to withdraw from trading on the stock exchange, i.e. it wishes to remove its shares from the market and discontinue its listing.
Discounted cash flow method (DCF method)The DCF method is a variant of the capitalized earnings method. It is particularly suitable for the valuation of companies that use a cash flow approach in their accounting. have implemented. This is likely to be the norm, especially for companies that have been audited. The DCF method is associated with a high computational effort. For unlisted companies, it can be difficult to determine comparative values of other companies in the same industry.
Disintermediation(Economics) describes the elimination of individual stages in the value chain. Thus the loss of importance of intermediaries in the information society the disintermediation of digitizable and non-digitizable goods in the global information market.
Distressed debtThe term covers non-performing liabilities whose full repayment by the debtor is at risk; a distinction is made here between non-performing loans and subperforming loans.
Distressed Debt InvestmentsThe acquisition of non-performing liabilities by Investors who either hold on to the loan receivable, the collateral or by means of a debt-equity swap in the case of corporate loans. wish to acquire shares in the debtor company.
Distributed Ledger Technology (DLT)A technological infrastructure used for documenting certain transactions. In contrast to the classical approach, in which a general ledger is usually managed by only one instance, here any number of basically identical copies of the ledger are maintained decentrally and simultaneously by different parties. Appropriate measures are taken to ensure that newly added transactions are adopted in all copies of the ledger and that there is agreement (consensus) on the current status of the ledger at any given time.
DivestCoDivested Company, a spun-off company or part of a company to be spun off.
DivestmentDenotes the opposite of investment. Sale of assets and equity interests of a company.
Divestment at IPOSale of shares at the initial launch of the company on the stock exchange.
Divestment FinancialsKey figures for disposals of business units, financial data for disposals of shareholdings and rights similar to shareholdings in companies.
Divestment through depreciationComparable to total loss.
DORA OrdinanceA central pillar of the Digital Finance Package is the Regulation on the “Operational Stability of Digital Financial Sector Systems and amending Regulations (EC) No. 1060/2009, (EU) No. 648/2012, (EU) No. 600/2014 and (EU) No. 909/2014” (Digital Operational Resilience for the financial sector = DORA).
Double DipIf the economy still turns around after a brief upswing phase, the once into negative territory, this is referred to as a double dip. Analogously, this term also applied to other business risk situations.
Drag rightsIn order to increase the market value of their business shares and to To secure a (further) exit strategy, investors regularly ask the founders to grant them a so-called drag long right. This is a co-sale obligation, on the basis of which investors, with their own intention to sell Founders under certain conditions can force their to sell shares in the company as well.
Dual track processIn this process, an IPO is prepared in parallel with the divestment process.
Due DiligenceDetailed examination and evaluation of a potential investment company as a basis for the investment decision.
Early Stage FinancingFinancing the early stage development of a company from conception to the start of production and marketing.
Earn-out clauseEarn-out clauses involve the determination of variable purchase price components that become due at a certain point in time after the transfer of the company depending on certain earnings components. In practice, corporate transactions threaten to fail because the buyer and seller cannot agree on the future earnings potential of the company. The aim of earn-out clauses is to bring a transaction to a successful conclusion despite differing purchase price expectations.
EBITEarnings Before Income and Taxes, ordinary operating profit before interest and taxes. Used to measure earnings on a debt-free basis. Another variant, EBITA, in which earnings are additionally adjusted for depreciation and amortization.
EBITDAAbbr. for Earnings Before Interest, Taxes, Depreciation and Amortization. Means “Earnings before interest, taxes, depreciation, amortization and impairment of intangible assets”.
Entry StandardSub-segment of the Open Market of the Frankfurt Stock Exchange with additional transparency requirements. This provides small and medium-sized enterprises with cost-effective access to the capital market. Inclusion in the Entry Standard does not constitute a listing on an organized market within the meaning of Section 2 (2) of the German Stock Corporation Act (AktG). 5 of the German Securities Trading Act (WpHG). The Entry Standard is primarily aimed at qualified investors pursuant to Section 2 No. 6 of the German Securities Prospectus Act (Wertpapierprospektgesetz — WpPG) who are in a position to assess and assume any increased risks associated with investing in shares of the companies listed here. Since July 2012, companies have had to prepare a public offering with a prospectus for inclusion in the Entry Standard.
Equity Cure lawAdditional capital brought in by the shareholders of the borrower capital (e.g. in the form of a capital increase, a payment into the capital reserve or from shareholder loans) may not be used under certain circumstances. Requirements for the calculation of and compliance with financial covenants be included. The charm of an Equity Cure lies especially in this, that by a payment of the shareholder to the borrower the violation of the financial covenants can be avoided retrospectively, without the creditor has any rights and without the banks having any Charge fees for covenant breakage.
Equity kickerThis is understood to mean the opportunity to participate in the success of the company. This can consist, for example, in the conversion of mezzanine capital into equity, i.e. a “real” equity investment. A shareholding is also conceivable in the event of an intended subsequent IPO. Lenders are thus given the opportunity to acquire shares in the partnership or corporation to be financed at a later date, often on special terms.
Equity ratio(The equity ratio is a business indicator that shows the ratio of equity to total capital (= total assets) of a company. The equity ratio is the most important vertical balance sheet indicator that provides information on the capital structure of a company. gives. It serves as the basis for financing decisions within the company itself.
Equity SponsorEquity investor
Equity ValueEquity value. The value of equity expressed as market value; in a transaction, this corresponds to the purchase price.
ERP Special AssetsERP = European Recovery Program. The federal government supports start-ups and small and medium-sized enterprises by providing low-interest loans, equity capital, quasi-equity funds and indemnities. The funds for this come from the ERP Special Fund, among others. The origins of the ERP Special Fund go back a good 60 years. At that time, the U.S. provided financial reconstruction aid to Germany through the “Marshall Plan.” Since then, funds have been allocated from the special assets thus created.
ERP systemEnterprise Resource Planning System, means to control the resources available in the company, the organization of all administrative, dispositional and controlling activities of a company. The goals of ERP are improvement of organizational processes and structures, faster adaptability to company and market changes, and optimization of business processes.
Escrow accountEscrow account.
ESGStands for Policy and Guidelines with regard to Environmental, Social and Governance Issues.
Event of DefaultBreach of Contract.
Evergreen FundFund of an equity investor with no limited term and which is provided with further capital by the shareholder(s) as needed.
eWpG(abbr.) Law on the introduction of electronic securities (since 2020).
ExitExit of an investor from an investment by sale of a share. Exit options: Buy Back, Trade Sale, Secondary Purchase, Going Public.
Expansion FinancingFinancing of corporate growth that cannot be financed by profits generated by the company alone. The funds are used to finance additional production capacity, product diversification or market expansion.
Fact BookContains a structured and systematic analysis and presentation ofall essential data of a company.
Failed Leveraged Buy-OutFailed, mainly (and usually too highly) leveraged takeover by financial investors. This in turn offers interesting takeover options for specialized investors, most of whom acquire the loans and some of the shares. These investors excessively often bring about a change in management. In their view, this is an interesting investment segment because, on the one hand, auction prices are rarely payable and, on the other hand, greater expertise in restructuring can be offered to strategic investors.
Family Office (FO)See Single Family Office.
FATCAForeign Account Tax Compliance Act. With FATCA, the US tax authority IRS intervenes directly in all transactions with US sources.
FFIEnglish Foreign Financial Institutions. All banks (including building societies and cooperative banks) and institutions that hold and manage financial assets for the account of third parties (brokers, custodian and depository banks) generally qualify as FFIs.
Financial covenantsCollective term for various clauses in loan agreements that oblige the borrowing company to comply with certain ratios relating to equity, debt, earnings and/or liquidity. Financial covenants are ancillary provisions relating in particular to Credit agreements. They regulate behavioral obligations, i.e. not payment obligations, and contain legal consequence clauses in the form of sanctions. They help banks to identify and counteract impending defaults at an early stage and are tailored to the company in question. Particularly important are clauses relating to earnings and cash flow ratios. These are If the covenants are breached, this often leads to higher interest rates on the loan and the involvement of external consultants at the company.
Financial EngineeringThe breaking down of financial securities into their basic elements and then reassembling them according to the requirements of a new financing structure. In the case of private equity, the hallmark is in particular the optimal utilization of debt capital.
Finetrading(A compound word made up of finance and trade). Refers to a process of pre-financing purchases of goods in the SME sector.
FISGOn July 1, 2021, the Financial Market Integrity Strengthening Act (FISG) came into force (reason: Wirecard) and addresses three regulatory complexes: corporate governance, the balance sheet control procedure (enforcement) and the audit of financial statements. The new regulations particularly affect the management boards and supervisory boards of capital market-oriented companies. Central to this: Increasing importance of management and control systems (especially ICS & RMS), qualification and duties of the (future mandatory) audit committee and reorganization of the balance sheet control procedure under the sole responsibility of BaFin.
Fronting BankThe term “fronting” comes from the credit business and here in particular from the syndication of loans. The fronting bank represents the sub-participating banks in its own name, but for the account of a third party. The bank issuing the loan is therefore on the “front line” vis-à-vis the borrower.
Fund of FundsUmbrella Fund, which uses the funds accruing to it for the purpose of the Risk diversification predominantly in investments in other directly investing investment companies without taking a direct stake in companies.
FundraisingRaising investment capital for the purpose of establishing a holding company.
GAFA AnalysisComparison of company positioning with Google, Amazon, Facebook and Apple.
General Partner (GP)The general partnership is the most common form of American partnership. Common term for venture capital or private equity companies.
Going PublicIntroduction of the company to the stock exchange.
Hands OnActive Care.
HeadroomThe margin agreed with the lenders between the target figures and the covenant, so that even normal operating fluctuations do not lead to a breach of the financial covenants.
High yield bondshave largely the same investors as leveraged loans, albeit fewer pension funds and banks and more hedge funds. A high yield bond is a debt instrument issued by corporations. Both leveraged loans and high yield bonds comprise the fixed income market rated below investment grade and are generally rated lower than BBB-.
HoldCoMerging a U.S.-listed SPAC and a target company in Europe often requires first establishing a European company (HoldCo) in which the SPAC and the target merge through a series of legal steps.
HR ServicesHuman Resources Services, Human Resources Consulting Services.
Hurdle raterefers to a certain minimum return or break-even point that a fund must achieve in order for the fund management to participate in the fund’s profits. As a rule, the hurdle rate is applied primarily to so-called private equity or venture capital funds.
ICT risksRisks that can arise from information, communication, technology.
ILPA Private Equity Principles(ILPA = Institutional Limited Partner Association) to establish binding procedures regarding fund partnerships between limited partners and general partners, ILPA developed the Private Equity Principles (Principles), the first document of its kind for the private equity industry.
In-Court SaleTransferred reorganization in which the assets and legal relationships that make up the company’s business operations are transferred to strategists (e.g.competitors) or financial investors.
IncentivizationPerformance incentive, performance pay.
Investment grade ratingIn finance, a rating is the ordinally scaled classification of the creditworthiness of a company or financial instrument. The rating is usually carried out by a rating agency or a credit institution.
InvStGAbbr. for Investment Tax Act.
IoTThe Internet of Things is a collective term for technologies of a global infrastructure of information societies, which enables physical and virtual objects to be networked and to work together through information and communication technologies.
IPOTerm for the initial public offering of shares in young and medium-sized companies on a stock exchange (see also ‘Pre-IPO’).
IRRInternal rate of return of a payment series.
IRSAbbr. for Internal Revenue Service, the United States federal tax agency under the Department of the Treasury.
JOBS ActAbbr. for Jumpstart Our Business Startups Act, a new U.S. federal law aimed at increasing job creation and economic growth in the United States by improving access to the U.S. public capital market.
KPIAbbr. for Key Performance Indicator. The term refers to key figures that can be used to determine the performance of activities in companies. Which KPIs should be looked at to measure success or failure depends on the company, the measure in question, and its goals.
KYCAbbr. for Know-your-Customer Principle, (English for “Get to know your customer”). This refers to the verification of personal and business data of new customers of a credit institution for the prevention of money laundering and terrorist financing on the basis of the Money Laundering Act 2008.
Large CapShares are divided into large caps, mid caps and small caps according to their market capitalization, whereby the term “cap” is short for capitalization. Market capitalization is calculated by multiplying the number of shares of the company traded on the stock exchange by the current share price. Large caps, the companies with the highest stock market value, include those with a market capitalization of over two billion euros. Mid caps are companies with a market capitalization of between 500 million and two billion euros, while small caps have a market capitalization of less than half a billion euros. Small caps are the equity category with the highest expected returns.
Later Stage FinancingFinancing of expansions, acquisitions, bridging, etc. for established medium-sized companies.
LBO (Leveraged Buy-Out)Predominantly debt-financed corporate acquisitions.
Lead investorThe investor party, which is in a syndicate of investors the negotiation and organization of the financing round.
Legal Due DiligenceLegal investigation of all existing contracts.
LegalTechalso Legal Technology, describes the use of modern, computer-based, digital technologies to automate, simplify and improve legal discovery, application, access and administration through innovation.
Leverage effectTerm for the leverage effect of debt capital, which is then arises when the return on assets is higher than the return on debt. The interest rate to be paid on the same amount of borrowed capital is a higher return than would be the case if the investment were made solely with equity capital. would be the case. The difference between the interest payments and the interest payable on the Accordingly, the return on debt capital represents the leverage effect.
Leverage ratioDebt financing portion of a private equity transaction. For conservative financing, the leverage ratio is 50–60%; for progressive financing, leverage ratios of over 90% are rarer than in the 1980s, for example.
Leveraged Buy-Out (LBO)(engl.) Debt-financed takeover, refers to the acquisition of a company with the inclusion of a large proportion of borrowed capital to settle the purchase price. Usually, the exclusive or predominant security for the acquisition financing is provided by the target company and its assets.
Leveraged LoansSubgroup of syndicated loans, i.e. loans distributed among several creditors, which are usually senior secured (i.e. senior to other liabilities classified as junior or subordinated) and which, according to the various heterogeneous definitions, either (1) are not investment grade (i.e. below BBB+) or (2) have a debt-to-EBITDA ratio of 3.0 or more or (3) are priced more than 150 basis points above the London Interbank Offered Rate (LIBOR).
Limited Partner (LP)A limited partnership is an Anglo-Saxon legal form of a company that is comparable to a German limited partnership and consists of at least two partners. The general partner of a limited partnership is the general partner (GP), who also holds the management and power of representation of the company. The investors participate as limited partners in a similar way to shareholders or limited partners.
Liquidation preferencesContrary to what the wording suggests, this provision does not only regulate the distribution of surpluses from the liquidation of a company, but also the distribution of proceeds in the event of an exit or comparable measures.
Loan-to-own strategySpecialized investors try to realize the value of non-performing loans by swapping them for shares in the company, usually without consulting management or the existing shareholders, in order to participate in the expected increase in the value of the company. If successfully implemented, this strategy can generate high returns or prevent bad debts in the event of impending insolvency.
Locked Box PrincipleAs an alternative to the concept of ‘closing accounts’, the so-called locked box principle has also become established in recent years. Conceptually, this principle is not about adjusting the purchase agreement, but rather about the parties working towards an interim closing as close in time as possible reference, which is usually guaranteed by the seller. The seller then additionally guarantees the buyer that no direct or indirect outflows (usually liquidity outflows, e.g. dividends) have been made to the seller or related third parties since the interim balance sheet date. Any profit generated in the meantime shall accrue to the benefit of, and any loss to the to the disadvantage of the buyer. The seller achieves price security through the fixed purchase price; subsequent purchase price adjustments can at most still result from warranty or contract violations. In addition to the fixed purchase price, interest is often agreed on the purchase price until the closing date.
LPAbbr. for Limited Partnership. Equity funds are typically organized as limited partnerships with a fixed term of 10 years.
M&A (Mergers and Acquisitions)Mergers and acquisitions.
MAC clauses (Material Adverse Change)Are attributed to the financial covenants. The abbreviation for MAC stands for Material Adverse Change, which translates as a ‘material adverse change’ in the basis and circumstances of a transaction. As a rule, the reference point is the net assets, financial position and results of operations of the target company at the time the agreement is concluded.
Machine LearningForms a subfield of artificial intelligence research and at the same time an umbrella term for other technologies. The term In very simplified terms, refers to a process in which an artificial system is trained using an algorithm based on examples, but without simply memorizing and later matching them, but rather recognizing and generalizing recurring patterns in the examples. The system is then able to analyze even unknown data in order to derive Extract information based on probabilities. applications are currently among the most sought-after AI-based technologies.
Marketmakerprovide sales prices for investments, process sales and thus create liquidity in a market.
Material Adverse Effect Clause(= MAC clause).If a significant deterioration is of the borrower’s circumstances occurs, which is associated with a certain likelihood that the borrower will not be able to meet his obligations. can no longer comply with the credit agreement, the lender shall the right to call in the loan.
MBI (Management Buy-In)Acquisition of a company by an external Management.
MBO (Management Buy-Out)Takeover of the company by the existing management.
MENA InvestorsInvestors from the Middle East & North Africa region.
MEP (Management Equity Participation)Management shareholding
MezzanineFinancing funds that bridge the financing gap between external and Equity capital in the capital structure and both equity and debt capital character have Forms commonly used in Germany: partiarische Darlehen, Shareholder loans, preferred shares, profit participation certificates, silent partnership, Seller’s Notes.
Mid Capssee Large Caps.
MoRaKGGerman Act to Modernize the Framework Conditions for Equity Investments.
Moral HazardThe English term for moral hazard. This refers to the risk that a person will behave immorally or carelessly because an insurance policy, law, or other institution protects in the event of losses that would otherwise result from his or her behavior.
Mulligan clauseAccordingly, a first breach of financial covenants does not yet lead to the far-reaching legal consequences of an event of default. Rather, the borrower is granted a grace period in which compliance with the covenants in the subsequent period will cure the breach. With other Words: a loan agreement violation under the mulligan clause occurs only if the borrower has violated the financial covenants for two consecutive test periods.
Net debt reconciliationCash and cash equivalents and comparable assets are netted against financial liabilities, in particular medium- and long-term liabilities to banks, but also in some cases “quasi-financial liabilities” such as taxes, pensions and, where applicable, other deductible items agreed by the parties.
Net Worth CovenantA certain ratio of liabilities to equity.
Non-financial covenantsThey mainly concern the collateral ranking clauses. A distinction must be made here between negative clauses, positive declarations and equality obligations. Typically, the practice knows combinations. A violation of a negative clause leads, for example, to the following often to the obligation to provide appropriate security.
Non-performing loansNon-performing loans. A default occurs as soon as the debtor defaults or only meets its payment obligations to a limited extent. From Non- Performing loans are referred to in particular as soon as the debtor is three (according to a recommendation of the Bank for International Settlements) to six months in arrears.
Notary escrow accountIn general, an escrow account is an account held in trust but in the notary’s own name (i.e. in the name of the notary).
Pari-passu liabilitiesEqual-ranking claims (Latin pari passu — “in the same step”)
Payment in Kind (PIK)Bonds that grant their issuer the option for a defined period of time either to make the interest payments due in cash on the coupon date or to transfer to the bondholders a bond in the equivalent amount of the interest payments due.
PECs (Preferred Equity Certificates)PECs are (hybrid) financing instruments, which are recognized by the Luxembourg borrower as a taxable and qualify as debt on the balance sheet. PECs can have fixed or variable interest rates.
PIPEPrivate investment in public equity (private investments in publicly listed companies).
Playing the Yield CurveAssessment of the return/risk curve, i.e. investors demand a higher return for higher risk.
Pledge FundsPledge funds, or co-investment clubs, are basically customized investment models used by managers as an alternative structure to the traditional private equity fund.
Post-Money ValuationRefers to the enterprise value that already includes the capital contributed by the VC/PE investor. This method is used when the investment does not increase value, but merely maintains it.
PPP (Public Private Partnership)Abbreviation for public-private partnership (PPP), which is predominantly understood as cooperation between the public sector and private industry.
Pre-IPOCompany phase immediately before the IPO.
Pre-Money ValuationThis refers to the designated enterprise value prior to a financing round.
PricingPricing or pricing policy deals with the analysis, determination and monitoring of prices and conditions of production or services and is part of the distribution policy of a company.
Primary marketFinancial market for the initial issue of securities (issuance) and their sale (placement). Synonym: issue market; opposites: Secondary market, circulation market
Private debtincludes borrowed funds provided primarily by institutional investors usually outside the banking sector. Private debt is defined here as the provision of debt capital to companies primarily by institutional investors outside the capital market. Debt and mezzanine securities, most of which do not have an investment grade rating.
Private Equity (PE)
Equity. Company holdings that can only be traded privately, not in publicly regulated markets.
Private high-yield bondsPrivately placed high-yield bond.
Private placementSpecial form of IPO: Securities of a company are only offered to a selected group of investors and not publicly via the stock exchange. If a company wishes to list its shares on the stock exchange, either the company itself (self-issue) or the issuing bank (third-party issue) can sell the shares to selected investors. If the shareholders are exclusively so-called qualified investors (e.g. banks, funds) or if there are less than 100 non-qualified investors within the entire EU, the company is not subject to the prospectus requirement (see Art. 2 (1e) EU-PR European Prospectus Directive).
Private Placement Memorandum (PPM)Via a private placement as a “public placement”, a private placement memorandum (investor memorandum) or in short form as an investment fact sheet can be used to raise capital to improve liquidity in the company.
Protective shield proceedingsRepresents a combination of the enforcement stop of the preliminary insolvency proceedings and self-administration. The latter is initially ordered for a maximum of three months in order to work out an insolvency plan for the insolvent company.
Public to PrivateA listed company is delisted in order to carry out acquisitions/divestments of parts of its operations, restructuring, etc.
Purchase MultiplePurchase price of a portfolio company as a multiplier of EBITDA.
Purchase PricePurchase price.
QI (Qualified Intermediary)A qualified intermediary is an institution classified by the IRS as a qualified intermediary, whereby a U.S. auditor audits the compliance of foreign banks, etc.
Quantitative easing(or QE from English quantitative easing) refers to an unconventional form of expansion of the monetary base (expansionary monetary policy) by a central bank. In this process, the central bank purchases mostly long-term private or public securities, usually government bonds, from commercial banks.
Request for Proposal (RfP)Invitation to bid.
Reset Dealstransactions that provide for a price adjustment. The issue amount of the shares or the conversion ratio of a convertible bond may be adjusted downwards (or upwards) depending on various criteria, depending on the agreement. These criteria may include, for example, the issuer’s share price at a particular point in time. See also under variable deals.
SECThe United States Securities and Exchange Commission is the U.S. Securities and Exchange Commission responsible for overseeing securities trading.
SEC filingsReports and documents that a company listed on a U.S. stock exchange must submit to theSecurities Exchange Commission ( SEC) at regular intervals or when certain events occur. This includes, for example, quarterly reports, annual financial statements, etc.
Second Lien CapitalAs a rule, subordinated financing to existing financing.
Second Round FinancingThe second round of financing for a company that has already received venture capital or private equity in a first round.
Secondary marketIn finance, refers to a market in which market participants acquire or resell financial instruments already in circulation as a trading asset. Complementary term is the primary market.
Secondary MarketA market or exchange for securities which are bought or sold following their initial sale. Secondary liquidity is the trading volume in thesecondary market
Secondary Public Offering (SPO)Capital increases by placing additional company shares with investors via an IPO.
A venture capital or private equity company sells its shares in a portfolio company to another venture capital or private equity company or to a financial investor.
Secondary transactionsIn secondary private equity (PE) transactions, the existing (partial) portfolio of PE investors (e.g. venture capital, bridge, buy-outs, mezzanine, etc.) is sold. The sale of individual funds or parts thereof is usually initiated by the investor; however, it can also be initiated by the management of the PE houses. The sale enables the Investors generate liquidity immediately.
Seed Capital Financing
Financing the maturation and transformation of an idea into usable results up to the prototype, on the basis of which a business concept is created for a company to be founded.